Research Essay on Occupy Wall St.

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  • Topic: Civil disobedience, Protest, Federal government of the United States
  • Pages : 9 (3602 words )
  • Download(s) : 38
  • Published : December 5, 2012
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Occupy Wall Street: The Solution to the Collapse of the Economy?
In October of 2008 Congress, passed a $700 billion rescue bill to bail out, and possibly save, the doomed U.S. and global financial systems from collapsing. This decision was only a piece to the $1 trillion government plan to level off the stock market and unfreeze the credit which was needed after the collapses of the financial institutions of Lehman Brothers and Washington Mutual. The government also stepped in and federally took over such institutions as Fannie Mae and Freddie Mac, which together hold about $5.4 trillion in mortgage loans; 45 percent of the national total. The governmental firms were heavily burdened because of bad investments in subprime mortgages and other financial instruments. To save the banks the U.S. government dedicated about $250 billion directly into the banks to make them capable of lending to each other again. This was done so the nation’s credit crisis would be eased. As policy makers looked for new options to save the economy, experts wondered if the bailout was enough to bring back the economy speculated the bailout cost for taxpayers. They also contemplated whether this rescue idea would cause an even deeper hole in the economy. The solution to this problem from the view of the public was a protest. This protest is known as the Occupy Wall Street Movement, which started in New York City on Wall Street in the Bowling Green district (Billitteri). According to Thomas Billitteri, a journalist with 30 years in business, before the actual bailout happened, a number of huge events caused the monumental bailout to happen. Fannie Mae and Freddie Mac were seized by the federal government, which promised to inject up to $100 billion into each firm as there were concerns about the cash reserves for each firm. The second issue was the biggest bankruptcy in U.S. history with the investment bank of Lehman Brothers collapsing. Merrill Lynch was another issue by being bought out by Bank of America before facing the same fate of Lehman Brothers. Two more issues with banks were Washington Mutual failing causing the biggest bank collapse in U.S. history as well as Wachovia Bank sold out to Wells Fargo Bank. The last huge event was when Goldman Sachs and Morgan Stanley switched to become commercial banks subject to federal regulation, leaving Wall Street without investment banks. In a rushed prime-time televised speech on September 24th, President George W. Bush warned that “America would slip into a financial panic” and “distressing scenario” of small business failures, job losses and home foreclosures. (Billitteri) The collapse of the financial system could be blamed on the big firms that collapsed or needed a bailout through the month of September, but you can also blame things like the collapsing real estate market, credit defaults, and failure of government regulators; all of which contributed to the plunging confidence of the financial system. The real estate market bubble collapse was created by record-low interest rates earlier this decade. Lenders made a massive housing bubble, and borrowers could refinance based on ever rising home values. Home prices fell, millions of homeowners found themselves owing more on their home than what it was actually worth, thus causing mortgage defaults and foreclosures nationally. With the real estate market collapsing, the credit-default swaps became more and more apparent. The credit crisis was caused by insurance-like contracts that are supposed to guarantee against loan defaults. Subprime and other loans were backed by trillion of dollars in credit swaps. When the home buyers started to default, the financial institutions that sold the swaps lacked the capital needed to make good on the guarantees and investors who had purchased risky mortgage-backed securities were left hanging. (Billitteri) Major financial institutions, in the United States globally borrowed heavily to invest in mortgages. As...
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